Barnes & Noble Treads Water

There was a mix of good news and bad news in Barnes & Noble’s first-quarter financials, which the company released last week for the period ended August 2. On the positive side, B&N cut its overall net loss to $28.4 million in the first quarter of fiscal 2015, down from $87 million in the same quarter last year, with $50 million in cuts coming from downsizing the company’s Nook segment, which had a negative EBITDA of $4.6 million in the quarter, operating at close to breakeven. Revenue for the entire company fell 7%, to $1.24 billion. Sales in B&N’s retail trade books division fell 5.3%, and Nook segment sales dropped by 54.3%. The bulk of the retail sales decline was attributed to the sale of Nook products; excluding Nook items, core comp sales fell 0.4% in the quarter compared to an overall comp decline of 5.1% in the retail segment.

Both B&N CEO Mike Huseby and Retail CEO Mitch Klipper said, in a conference call with analysts discussing the results, that the relatively good core comp performance was due in part to improved industry trends related to the sale of print books. Klipper noted that adult and children’s sales were driven by movie tie-in books; he added that the dispute between Amazon and Hachette also helped to lift sales in the quarter. During the quarter, B&N closed three retail trade stores, finishing the period with 658 outlets.

Just after the close of the quarter, B&N began testing same-day delivery with Google in three cities. B&N is working with Google Shopping Express at eight stores in Manhattan, West Los Angeles, and the San Francisco Bay area. As part of the test, Google employees are on-site at B&N stores, and a fleet of trucks is available to deliver items to customers in four-hour windows.

On the negative side, while a decline in sales of Nook devices was expected, sales of digital content fell 24.2% and sales through BN.com also dipped in the quarter. Klipper said that the relaunch of the BN.com website, originally set for late summer, is taking longer than expected, and rather than releasing it during the holiday season, the new version of the site will not be introduced until 2015. Reversing the sales slide of digital content remains a top priority for B&N, Huseby said; to that end, the company is offering $200 in free content to consumers who activate new accounts when they buy the new Samsung Galaxy Tab 4 Nook tablet. B&N isn’t interested in just selling tablets, he emphasized, it needs to sell content as well.

Although Huseby didn’t offer details about the planned separation of Nook Media (comprising Nook and college bookstores), he implied that there is interest in Nook from outside companies. “What we are really finding out is that these third parties believe there is value in the Nook consumer assets and the catalogue, and our Nook Press, our publishing business, the people we have there, and our software—and that value probably exceeds our ability to realize it, based on our current capital structure,” Huseby said. He added that while he hopes to have a decision by the first quarter of calendar 2015 about the future of Nook Media, there is no certainty a decision will be reached during the period.